Life Insurance: An Excellent Gift When the Reasons for It Expire

Featured Article
February 2015

People buy life insurance for five main reasons, any of which may “expire” eventually—at which time the policy can make an excellent charitable gift. Here are those top five reasons:

  • Income replacement, which is especially important for younger couples with children who want to provide income for survivors in the event of premature death.
  • Mortgage protection, to pay any balance due at death.
  • Buyout of a business partner’s interest from the partner’s family members who inherit that interest when the partner dies.
  • Final expenses following a death when other sources of cash may not be available.
  • Liquidity, particularly important in the case of a large estate with assets like a private business when money is needed for taxes and other expenses.

You can give unneeded life insurance
With the passage of time, these needs for life insurance may no longer exist. The children have grown and left home, the mortgage has been paid, significant investments have accumulated, and either the business has been sold or a transition plan developed.

If you are one of those with an insurance policy no longer needed for its original purpose, consider transferring ownership of it to our organization. If the policy is paid up, you would receive a charitable deduction for the lesser of the replacement value and your cost basis (a number that can be provided by the insurance company). If you are still paying premiums, you would receive a charitable deduction for approximately the cash value (the interpolated terminal reserve value) and you would also receive deductions for premiums you subsequently pay.

You can name a charitable beneficiary
If you prefer to retain ownership in case your circumstances should change and you or your family might need the cash value or proceeds from the policy, you could name our organization as beneficiary but not owner. Although you would not receive a current income-tax deduction, your estate would be entitled to an estate-tax deduction for any proceeds paid to us.

A life insurance policy can be a great way to ensure a future gift—perhaps for a named endowed fund—without affecting your current lifestyle.

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